The problem with carbon tariffs: They aren't fair
Countries need to honestly address the issue of standards.
As the United States considers its own cap-and-trade system to reduce domestic emission levels, support is growing behind the idea of a "carbon tariff," a tax on imports from countries which are not undertaking similar environmental measures.
Recently, Energy Secretary Steven Chu endorsed the idea of a carbon tariff as a means of defending the international competitiveness of American industries. His concern is that other states will have an "unfair" trade advantage over the United States if we reduce greenhouse-gas emission and they do not.
What is not being debated is how much carbon other countries should be allowed to produce. Environmental scientists maintain that the planet can only sustain a finite amount of carbon emissions, but scientists do not tell us how to divide these emissions between nations. Yet this is the key issue in establishing what is fair in international trade as well as addressing climate-change issues globally. Without such a conversation on the distribution of global carbon emissions, carbon tariffs will not be effective.
For instance, if the United States decides to apply a carbon tariff, then it must decide how much carbon it gets to produce compared with other countries. The Boxer-Lieberman-Warner bill, for example, determines whether another country's environmental regulation is comparable to the US (and thus exempt from a carbon tariff).
The bill establishes a dividing principle that freezes everyone at their current share of greenhouse-gas emissions and requires that countries reduce emissions from these levels. Under this standard, the US, which represents less than 5 percent of the world's population, is allocated over 18 percent of the world's greenhouse-gas production.
The problem for the planet's atmosphere is that other countries can do the same thing but based on different dividing principles. China could apply carbon tariffs to any country that has a higher per capita level of greenhouse-gas emissions than it does. (This would include the US, Canada, and the European Union.) India could adopt a formula that gives nations that have already contributed significantly to the current stock of greenhouse gases fewer emissions rights in the future.
This series of conflicting national level environmental measures is bad for the environment and bad for the global economy. First, it does not solve the global climate-change problem. If each state is able to choose its own level of greenhouse gases it should be permitted to emit, then countries will select standards that benefit themselves and the planet will still have an unsustainable level of greenhouse-gas production.
Second, a carbon tariff is detrimental to the global economy because it leads to increased barriers to trade based on different conceptions of how much carbon countries should be allowed to produce.
At a time of economic crisis, a carbon tariff provides the means for government officials to be protectionist when the global system needs to maintain a commitment to open trading.
We should not rely on the World Trade Organization (WTO) rules to solve this problem. The WTO (already under attack as insensitive to environmental concerns) will have little interest in arbitrating climate-change policies between nations.
In addition, a WTO legal challenge would take years to litigate. By contrast, other states could adopt reciprocal legislation almost immediately. The European Union has already considered imposing a carbon tariff on states that have not signed the Kyoto Protocol and could resurrect that proposal quickly. China and India could do the same. None of these tariffs would be beneficial for the global economy.
Perhaps only an economic and environmental crisis will finally get governments to accept an international climate-change agreement. But the idea that we have to wait years (if not decades) to reach a political solution could be potentially catastrophic, particularly when interim environmental damage has serious consequences that cannot be reversed by a future international agreement.
Countries need to honestly and openly address the issue of what standards should determine how much pollution each state should be allowed to produce. Adopting carbon tariffs on other states does not help us get there, and, at worst, could be an additional hurdle to reaching an international agreement.
We need multilateral negotiations on climate-change issues, not unilateral declarations (backed by carbon tariffs) of how the world's carbon limits will be distributed.
We must keep our focus on the policy outcome that we want to achieve: an open international trading system and an effective international climate-change agreement. The danger of carbon tariffs is that we may end up in a world that has regressed on trade relations and not adopted an adequate response to global warming.
Rachel Brewster is an assistant professor at the Harvard Law School.